1. Changing Times
For several years, we have been in an environment of ever falling interest rates, as Governments have relied on monetary policy to fix the damage wreaked by the GFC.
However, while this has arguably prevented some really horrible things from happening (such as a world-wide depression), it has not succeeded in making good things happen. Now many are looking to more Government spending to boost economic growth. In this context president-elect Donald Trump spoke on election night of modernising America’s often old and creaking infrastructure and making it the world’s best. Depending on the scale, this would indeed be a game changer. If successful, it could also draw other countries down this path, as well as lead to rising (instead of falling) interest rates.
2. Check how flexible your investment portfolio is
Our research clearly shows that different asset classes perform vastly differently at different times. Somebody retiring in 1969 would have been best served having their money in cash over the next 25 years, whereas somebody retiring in the mid 1980’s would have done best if they put all their money in shares. And, the differences were huge. (Ain’t hindsight great. Remember, though, that when investing in the real world, diversification is essential to manage some of the uncertainty).
3. If there are fundamental changes to the economic environment, change your portfolio to reflect that
As Darwin said, it is not the strongest, or fittest, or the fastest that survive, but the most adaptable.
The same goes with investing. If the (economic) environment changes, adapt.
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